Malaysian gold market to move south in 2023, bucking international gold market trend – Public Gold

KUALA LUMPUR— The Malaysian gold market is expected to trade lower this year amid lingering fears of global recession coupled with the Bank Negara Malaysia’s (central bank) four times overnight policy rate (OPR) hike in 2022, says Public Gold executive chairman Wira Louis Ng.

He said when the central bank raised the lending rate, it deteriorated the people’s liquidity and disposable income.

“The global recession coupled with the hike in OPR will impact the jewellery retail market because people will only buy gold when they have excess money after fulfilling their basic needs,” he told Bernama.

However, he said that the movement of the precious metal in the international market would be the opposite, saying that it would be influenced by the performance of the United States Federal Reserve’s (Fed) interest rate hike and worldwide inflation.

“When there is inflation, normally the gold price will go higher because inflation erodes the purchasing power of our money. But gold is the natural hedge against inflation, so, by right the gold price will go up.

“For this year, it depends on the Fed’s decision whether it is going to slow down the interest rate hike.

“We expect the international gold price will move higher in the first and second quarter of this year, as for the third and fourth quarter of 2023 we are still waiting for the indicative data to be clearer,” he said.

He said some analysts also predicted international gold prices to record a new high in 2023, above US$2,000 per troy ounce if the Fed does not increase interest rate.

Ng who is also the president of the Malaysia Gold Association (MGA) said the association hopes that the government would recognise the Sirim standard instead of solely depending on the London Bullion Market Association (LBMA) standard.

He said the LBMA standard is very tough and a world standard. It controls the market as they check the gold bars very thoroughly.

“The gold must be pure, they will check the source of the gold, mine operation whether legal or illegal, as well as environmental, social and governance (ESG) while in Malaysia, we only have Sirim standard,” he said. He added that banks like HSBC, Maybank, and UOB Bank only allow the gold bar to trade with LBMA standard.

Meanwhile, Phillip Capital Sdn Bhd dealer Tan Jenn Yuan believes that in 2023, gold may have much growth potential, is stable and yet positive.

“When we are looking at gold’s performance in 2023, we are anticipating an economic consensus which calls for weaker global growth akin to a short recession and also mitigating inflation; and the end of rate hikes in most developed markets,” he said.

He said that as a safe haven asset, gold is considered an inflation hedge but higher interest rates dim the bullion’s appeal by increasing the opportunity cost of holding the non-yielding metal — therefore, the price of gold will be affected by the Fed’s interest rate hike.

“Supply and demand of gold has always been a discussion, despite lacklustre returns for gold in 2022, its demand has always been on the rise.

“Jewelleries, fabrications, China’s demands, coins and bars for bank’s central reserves will be back to its pre-pandemic pace and probably at its highest level since 2016 if economic expansion returns.

“It is expected that central banks will pivot on their rate hikes and become dovish during 2023, which will ignite an explosive move for gold to end 2023 at least 20 per cent higher,” he added.

Bursa Malaysia Derivatives said gold futures saw its most active contract settle at US$1,781.90 per troy ounce on Nov 15, 2022, the highest on record due to the weaker US dollar amid hopes that the Fed would adopt a less aggressive approach to rate hikes.

The lowest price ever recorded since its launch was on Nov 4, 2022, at US$1,623.00 per troy ounce due to the Fed’s rising interest rates of 75 basis points.


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